Mastercard faces court over anti-competitive deals with major retailers

(Source: Bigstock.)

Proceedings have commenced in the Federal Court against Mastercard’s Asia/Pacific and Australian businesses over alleged breaches of competition law in deals signed with more than 20 large retail groups.

The Australian Competition and Consumer Commission says the financial services giant has been engaging in anticompetitive conduct since 2017 in the supply of debit card acceptance services, with the purpose of substantially lessening competition. 

The ACCC says Mastercard entered into agreements with more than 20 major retail businesses, including supermarkets, fast food chains and clothing retailers that conflicted with the commission’s least-cost routing initiative that aims to minimise costs for retailers processing debit cards and for consumers using them. 

That initiative was introduced to increase competition in the supply of debit card acceptance services by allowing businesses to choose the lowest-cost network – Visa, Mastercard or Eftpos – to process their transactions (ie: the cheapest interchange rates, also known as ‘strategic merchant rates’). Eftpos was often the cheapest option, the commission said.

However, according to the ACCC’s case, the agreements Mastercard struck with retailers offered discounted rates for Mastercard credit card transactions in return for the retailers committing to processing all or most of their Mastercard-Eftpos debit card transactions through the Mastercard network rather than with Eftpos. 

“We allege that Mastercard had substantial power in the market for the supply of credit card acceptance services and that a substantial purpose of Mastercard’s conduct was to hinder the competitive process by deterring businesses from using Eftpos for processing debit transactions,” said ACCC chair Gina Cass-Gottlieb.

“We are concerned that Mastercard’s alleged conduct meant that businesses did not receive the full benefit of the increased competition that was intended to flow from the least cost routing initiative.”

Under Australian law, a business with substantial market power will only be considered to be in breach of the Competition and Consumer Act 2010 if its conduct has the purpose, effect or likely effect of substantially lessening competition in a relevant market.

Cass-Gottlieb said reducing costs for businesses enables them to offer their customers better prices. “Making sure the major card schemes, Mastercard, Visa and Eftpos, compete vigorously is important for both those businesses and their customers.

“Promoting competition and investigating allegations of anti-competitive conduct in the financial services sector, with a focus on payment systems, is a priority for the ACCC,” said Cass-Gottlieb. 

“Financial service providers should be on notice that we will not hesitate to take action in response to concerns raised about anti-competitive conduct in this important sector of Australia’s economy.”

The ACCC is seeking declarations, penalties, costs, and other orders from the Federal Court.

In March last year, the ACCC accepted a court-enforceable undertaking from Visa in relation to concerns that Visa may have limited competition in relation to debit card acceptance through its dealings with large merchants.

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